Case #795

$20 million graphics design and production firm

This East Coast company designs high-end advertising graphics and produces various high-quality graphics for consumer-products companies and advertising agencies.

When Morris-Anderson & Associates was brought in, the company was losing money—volume was down severely due to cutbacks in discretionary advertising, yet the company’s cost structure had remained constant. The company was saddled with $3 million in debt, cash was short and as a result, multiple creditors were threatening to stop providing goods and services, and several equipment lessors were threatening foreclosure on their collateral due to non-payment on their leases.

After our crew’s assessment, a new business plan was developed to downsize the company and to manage the tight liquidity situation. We recommended that the CFO be replaced, as he was incapable of managing cash and vendors in this situation; one of our financial experts assumed the interim CFO position. We worked with the CEO/owner to resize the company for the current sales volume, laying off employees and moving out rental space that was no longer needed. We then led negotiations with the secured lender and several equipment lessors to restructure deals that worked within the 13-week cash budget we had constructed and verified. Additionally, we led efforts to expedite the collection of receivables, and worked for faster completion of customer in-process jobs to improve cash flow. Finally we worked with the sales management to set order targets that assured the company a minimum of a breakeven sales volume but higher price levels.

Thanks to cooperation from many parties and a belief in the reasonableness of our business and cash plans, the company was generating positive cash flow and achieving its business plan, and the lender was feeling secure in its collateral again by the time a permanent CFO was hired to replace us.